Correlation Between SCE Trust and Eversource Energy
Can any of the company-specific risk be diversified away by investing in both SCE Trust and Eversource Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SCE Trust and Eversource Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SCE Trust VIII and Eversource Energy, you can compare the effects of market volatilities on SCE Trust and Eversource Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SCE Trust with a short position of Eversource Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCE Trust and Eversource Energy.
Diversification Opportunities for SCE Trust and Eversource Energy
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SCE and Eversource is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding SCE Trust VIII and Eversource Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversource Energy and SCE Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SCE Trust VIII are associated (or correlated) with Eversource Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversource Energy has no effect on the direction of SCE Trust i.e., SCE Trust and Eversource Energy go up and down completely randomly.
Pair Corralation between SCE Trust and Eversource Energy
Assuming the 90 days trading horizon SCE Trust VIII is expected to generate 0.3 times more return on investment than Eversource Energy. However, SCE Trust VIII is 3.32 times less risky than Eversource Energy. It trades about 0.1 of its potential returns per unit of risk. Eversource Energy is currently generating about -0.02 per unit of risk. If you would invest 2,474 in SCE Trust VIII on August 30, 2024 and sell it today you would earn a total of 162.00 from holding SCE Trust VIII or generate 6.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 28.69% |
| Values | Daily Returns |
SCE Trust VIII vs. Eversource Energy
Performance |
| Timeline |
| SCE Trust VIII |
| Eversource Energy |
SCE Trust and Eversource Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SCE Trust and Eversource Energy
The main advantage of trading using opposite SCE Trust and Eversource Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCE Trust position performs unexpectedly, Eversource Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Eversource Energy will offset losses from the drop in Eversource Energy's long position.| SCE Trust vs. Dominion Energy | SCE Trust vs. Consolidated Edison | SCE Trust vs. Eversource Energy | SCE Trust vs. FirstEnergy |
| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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